Types of Restrictive Covenants

Although there is no law preventing employers from defining other types of restrictive covenants, on this webpage, we’ll discuss only two types: the covenant not to compete (“non-compete”) and the covenant not to solicit (“non-solicitation” provisions).

In a non-compete, the employee agrees not to take a job with another employer in competition with the original employer. A non-compete would also prevent an employee from starting a new business in competition with the original employer. When a new employer or new business is in competition with an original employer is an issue that is not always easy to resolve. A new employer or business might be in direct competition with the original employer, or the competition offered by the new employer or business might be much less direct. The degree of competition basically depends on the nature of the business.

Generally speaking, courts in New York State do not like either type of restrictive covenant, but they are especially careful in examining non-competes because they are generally more restrictive than non-solicitation provisions, tend to impede competition more, and may have a greater effect on an employee’s ability to earn a livelihood.

There are two types of non-solicitation provisions. One prevents the employee from soliciting customers of the employer. The other prevents the employee from luring away other employees of the employer. These types of non-solicitation provisions are also considered to be anti-competitive. Although it depends on the wording of the provision, they seem to have less of an effect on an employee’s ability to earn a living. Courts seem more willing to enforce non-solicitation provisions, but it depends on the wording of the provision, and the nature of the business that the employer and employee are engaged in.

A non-solicitation provision that prevents an employee from soliciting the current, past and potential customers of an employer is less likely to be enforced, because wording like this amounts to being a non-compete, and would probably be considered too broad. A non-solicitation provision which restricts an employee from contacting only customers that the employee had contact with while employed with the employer is more likely to be enforced than a provision restricting contact with all of the employer’s customers.

Another problem with non-solicitation provisions is when there is no soliciting. Suppose an employee leaves an employer for another company. While with the other company, a former customer from the original employer contacts the employee with a proposal. The original employer may take the position that the employee may not serve this customer, but where’s the solicitation? A court might take a different view than the employer..